Dec 5, 2013

It has been in news for few days now. After a very long time, WTO members seemed to have reached a position to clinch a deal. The deal was a toned down version of original mandate from Doha rounds, but even then, it was a big deal because it was a multilateral deal after a very long time. The world has drifted over to regional arrangements in recent years due to failure of Doha rounds. The multilateral differences are too many and too wide to be bridged, or so it was thought. WTO, as a multilateral trade body, started facing questions about its future. Some started to write it off. However, WTO remains relevant, even in the era of proliferating regional agreements, despite what some pundits say, due to its role in trade facilitation, enforcement and dispute settlements. And now, with the new Director General in place, it appeared as if finally a multilateral deal is about to fructify.

However, it now appears that it won't be. India has thrown the spanner in the wheels by being rigid in its stand about food security. I hoped that India won't be the one to be declared the spoiler, but it seems there is no option. The text of Commerce Minister of India's speech is here. I liked the way the speech was presented. It didn't say that India is a spoiler by being rigid. It took the topic of disagreement in it's stride. Basically the speech follows the below structure:

India has remained sincerely and constructively engaged in negotiations.

The current text puts developing countries in disadvantageous position.

Doha round had development mandate, including food security at its core.

We agree that food security is non-negotiable.

Hence the text that dilutes food security is non-acceptable to us.

We believe we should agree first on trade facilitation and helping LDCs, which this text falls short on.

India supports multi-lateralism and we should look to build beyond Bali and work on it.

So the last sentence says that India is not looking to conclude anything in Bali, with the given text. I have been liberal in re-framing sentences from the speech, but I have tried to keep the core intact. What the speech does is simple. While it takes a rigid stand on food security, it says it is ready for constructive engagement, as it always has been. It rises above the issue at hand, and takes a big picture view on multilateral negotiation.

The problem is, the train of such big picture agreements has gone. India has its own domestic compulsions to stick to its stand. So be it. But to expect others to keep engaged with the chimera of big-picture multilateral agreement is too much to ask. One must appreciate and respect India for standing up for its right (or what it felt right!). However, one must also understand that it pushes the already tottering multilateral framework over the irredeemable cliff.

Would India gain from this stand or lose? That's a tough question to answer. The domestic politics had tied India's hand at this point. With the recent food security act coming into existence, India cannot afford to have stifling WTO rules that makes it hard to implement. To that extent, walking away from this deal helps it to avoid future penalties on this account. On the other hand, the recent trend and growth of regional trade agreements is taking the momentum away from WTO. Agreements such as Trans-pacific, and Trans-Atlantic deals, in which USA is now actively engaging its energies, would take the trading world away from WTO framework. Any late entrant into such gatherings, as and when they expand, would face penalties. By walking away from this deal, India has thrown away a lifeline given to multilateral framework. The losers, for sure, aren't the developed nations. The gainers, as of now, cannot be ascertained.

Rejoinder on 7 Dec 2013: After multiple rounds of consultation between India, US and WTO, a revised draft acceding to India's demand on agriculture has been put out. The draft might be generally acceptable to all.